Creating a loyal customer base hasalways been a concern for retailers. But more recently, highinterchange rates on Visa andMasterCard purchases have been at theforefront of retailers’ minds. While theywant to increase business, costly creditcard transaction fees are siphoning theminiscule profit margins retailers areable to earn.
These problems are a little less of aconcern for both Wawa Inc. and WescoInc., which have formed partnershipswith Tempo Payments, previouslyknown as Debitman, and its TempoPayment Network, a national electronicpayment network for retailer-issueddebit cards. By issuing their own branded debit cards, the chains are able toshift customers to less costly debit transactions both in-store and at the pumpsby creating incentives for using thecards.
With Wesco’s new loyalty program,one customer was able to buy gas forjust 95 cents a gallon using rewards shehad saved up. As gas prices remainhigh, Wesco is confident this customerhas found her favorite gas destinationbecause she experienced first-hand howeasy it is to reap the program’s rewards.
How it Works
Tempo Payment’s primary focus ison debit transactions so it has the infrastructure to process these payments. Itteams with retailers to offer merchantbranded debit cards, which empowerc-stores to offer a low-cost alternative toVisa and MasterCard, while leveragingtheir own brand.
“This is a thin margin business and loyalty can be expensive. We introducea means for retailers to drive loyaltywithout a lot of cost,” said AnthonyReubner, vice president of businessdevelopment and relationship management for Tempo. “Retailers are feeling the pain of interchange. Our programsallow them to reduce interchange whileinvesting in customer incentives foradoption and migration to low-costdebit cards.”
According to Reubner, the net costof a gas transaction using the retailerbranded Tempo card is less than 15cents each, and inside the store a transaction is less than 10 cents. Comparethat to credit card transactions that cancost up to 2% of the transactionamount.
The reason Tempo can offer suchlow interchange rates is because of theway the company has built its paymentnetwork. It has relationships with mostof the major payment processors. Theprogram requires no point-of-sale implications, hardware or software. In most cases, it simply requires a call to the payment processor that the retailer will beaccepting the card.
By reducing interchange, retailerscan direct a portion of that savings tofund incentive programs for the customer. Incentive programs, like cents offgallons of gas or promotional prices foritems, drive sales by building customerloyalty.
“The cost reduction is substantial—possibly millions per year—and thatreduction allows retailers to pass thatsavings on to their customers withincentives,” said Reubner.
As Wesco, a 52-store chain based inMuskegon, Mich., reviewed its creditcard fees, it realized that it was payingthe lowest possible rate, but it still needed to save more. The company’s processing bank suggested it look intoTempo and it saw a winning proposition: a way to enhance its brandthrough its own debit card while givingcustomers valuable incentives to use it.
“We offer a two-cent discount pergallon if customers use our debit card as payment at the pump,” said RachelleOsborn, director of technology forWesco. The company is able to offermore cents off per gallon for everydaypurchases in stores—like three centsoff a gallon when customers purchase a24-oz. fountain drink or a Red Jackenergy drink—as long as customers usethe card. “Our vendors have been veryreceptive to our promotions. We’rehoping as we’re able to benchmark thelift on promoted items we’ll be able toentice more vendors to get involved.”
Wesco ran a two-store test of theprogram in May 2006, to make sure ithad the appropriate processes in placefor a successful launch in July. It alreadyhad two designs for its cards, so it sentthem off to Tempo to be encrypted, andTempo sends them directly to customers. (Wesco could have encryptedits own cards but, according to Osborn,the charge was worth having Tempo doit.) Tempo’s merchandising groupworked with Wesco on point-of-purchase (P-O-P) signage and applications,offering as much assistance as needed.
“They were constantly helping us,” said Osborn.
Quickly confident, it launched theprogram chainwide. With an investment of approximately $500 per location, the company has doubled itsTempo card transactions every month.
“The savings in processing fees withTempo has allowed us to pass this savings onto our customers. We see PINbased debit as one of the safest forms ofpayment. We want to be able to offerour loyal customers an effective way tosave money,” said Osborn.
Wesco can also gauge growth withdata harvested from the program. Atfirst, the company was getting reportsdirectly from Tempo. Now, Wescodownloads a daily file and imports it toits database. The information showswhat areas customers are signing up inand what towns might need more marketing emphasis.
“We now have a viable customerdatabase from all the informationTempo provides. You’d never get that kind of data from Visa or MasterCard,”said Osborn. “At some point we hope toanalyze the market basket data so wecan offer valuable coupons. We want tofigure out behavior and reward shopping habits.”
Can’t Beat ‘Em? Profit From ‘Em
Another benefit of using Tempo isthat the cards are accepted at more than200,000 merchant locations in the U.S.that participate in its Tempo PaymentNetwork, including Wal-Mart, Sam’sClub, Bed Bath & Beyond and CVS.The company is also able to use thisnetwork to create enhanced offers forretailers, as is the case the 545-storeWawa, Pa.-based chain.
Wawa had launched its own WawaVisa card program in 2005, and in 2006has enhanced its card offering to includea Wawa-branded debit card, the WawaCheck Card, with Tempo. First, itrewards customers with a $5 Wawa giftcard after the first time they use thecard. It offers a 10-cent rebate to customers for purchases made at Wawa,and it leverages Tempo’s network byoffering a five-cent rebate to customerswhen they shop at those merchants anduse their Wawa-branded debit card topay. Customers see cumulative rebatesat the end of the month credited back totheir accounts.
“When I see merchants like WalMart accepting the card, you see it’s taking hold,” said Bob Riesenbach, manager of new initiatives for Wawa. “Wewant to be on the leading edge ratherthan trailing.”
Wawa has almost completed a testphase in 29 stores across Pennsylvaniaand Maryland, which Tempo wasinstrumental in setting up quickly.
“We can offer retailers as much or aslittle help as they need, whether it’s marketing the program, manufacturing anddesigning cards, creating print applications and even coming to the table witha set of best practices incentives,” saidReubner. Tempo can have a programdeployed in as little as six weeks, allwhile keeping cost and effort to a minimum fore c-stores.
“Because of the way Tempo set upthe system, there was very little workfor us to do,” said Riesenbach. “We’reseeing a significant reduction in the costof accepting cards at our stores, whichwas a concern.
“But,” he added, “it’s also enabled usto improve our customer relationships.We reap benefits from the program andare sharing them back with the customers. In that sense, we’re creatingloyalty.”
Retalix Brings its Loyalty Platform to the U.S.
With a relatively long history of administering loyalty programs overseas, Retalix USA is rolling out its loyalty platform in the U.S.
“As such you can earn and redeem rewards at any store in the chain immediately,” said Bob Smith, the loyalty product solutions manager for Plano, Texas-based Retalix USA.
The integrated solution was designed to help U.S. operators retain customers with exciting and fresh programs. Retalix Loyalty features include:
The program is a self-contained system consistent with the rewards programs offered by airlines, which emphasize the value of long-term loyal customers and not quick fixes to attract customers just looking for the cheapest price.
“With so many companies already offering loyalty programs, convenience retailers have to come up with innovative solutions to attract and retain customers,” Smith said. “Differentiate your offering with a program that rewards truly loyal customers and offers a value proposition to influence the occasional customer to return. A lot of programs are too busy trying to attract occasional users that they ignore loyal patrons.”